Merrill Lynch assistant admits he kept ImClone information secret

NEW YORK -- An assistant to Martha Stewart's stockbroker pleaded guilty Wednesday to a misdemeanor charge that he took a payoff to keep silent about an alleged insider stock tip given to Stewart.

DEVLIN BARRETT

Published
12:00 am EDT, Thursday, October 3, 2002

Douglas Faneuil, 26, pleaded guilty as part of a deal to testify against Stewart and others who allegedly sold shares of ImClone Systems Inc. last December, if she is ultimately charged in the case. The charge is receiving money or other valuables "as consideration for not informing."

Stewart dumped nearly 4,000 shares of ImClone just before the stock price plunged on news the Food and Drug Administration would not review its highly touted cancer drug, Erbitux.

Court papers did not identify the "tippee" who received the insider information, but all the details of the anonymous wrongdoer clearly point to Stewart.

Faneuil's lawyer, Marvin Pickholz, was asked outside court if the "tippee" was Stewart, and answered: "If you guys read this information and you can't fill in the blanks, you're in serious trouble."

Faneuil admitted during his plea that he had withheld the truth from Securities and Exchange Commission investigators, as well as FBI agents, when interviewed about the trading activity.

"I did not truthfully reveal everything I knew about the actions of my immediate supervisor and the true reasons for the 'tippee's' sales," Faneuil said.

In exchange for stonewalling probers, Faneuil received an extra week of vacation and a free airline ticket, court papers said. His lawyer denied published reports stating the assistant had received Knicks basketball tickets in exchange for his silence.

Prosecutors are trying to build a criminal case against Stewart for allegedly receiving insider information. She and her friend Sam Waksal, ImClone's founder and ex-CEO, shared a Merrill Lynch broker, Peter Bacanovic, who was Faneuil's boss.

In the court papers, prosecutors said the tip to the "tippee," either directly or indirectly, came from Bacanovic.

Court papers also said that Bacanovic on Dec. 27 let the "tippee" know Waksal was trying to sell all of the ImClone stock that he held at Merrill Lynch.

"The tippee then sold all of the tippee's shares of ImClone stock, approximately 3,928 shares, yielding proceeds of approximately $228,000," the court papers said.

Waksal was indicted in August for allegedly telling family members to dump millions of dollars worth of ImClone stock before the bad news about Erbitux hit the markets. He pleaded innocent to the charges.

Stewart, who has previously denied any wrongdoing, has said she had a standing order to sell the ImClone shares if they fell below $60. Faneuil initially gave investigators the same account but later changed his story and said there had been no such order.

Faneuil pleaded guilty to receiving money or other valuables "as consideration for not informing." The misdemeanor charge carries a maximum penalty of a year in prison, but under the plea deal, Faneuil likely will get probation.